The Fed reduced the target rate 75bp to a range of 0% to 0.25% and was very aggressive in its accompanying statement. The decision was unanimous, as the FOMC said they were committed to keeping the rate at "exceptionally low levels" for "some time." They did not mention quantitative easing, but they remained committed to using unconventional policy tools to fight the recession. Possible tools include purchasing long-term Treasury securities, purchasing agency debt and mortgage-backed securities and implementing the TALF, which could promote credit extension to households and small businesses. Given that the rate is essentially zero, UBS economists feel like this was as aggressive as the Fed could get. The FOMC decision came after a record monthly decline in the CPI and a mixed start to the Q4 earnings season. CPI was -1.7%m/m (cons -1.3%) as weak energy prices and a weak core CPI (0.0%m/m, cons 0.1%) drove down the reading. In corporate news, a major US bank missed earnings but a large retailer managed to beat expectations. With downbeat expectations for earnings season, there is a greater chance of surprising results to the upside. The automaker story continues, with press reports suggesting the Big Three may yet be given access to TARP funds. However, for the automakers to receive more than the $15bn left under the first tranche of TARP, the Bush administration will likely have to make concessions with Congress in order to access the second tranche. In other news, OPEC will discuss production cuts when it meets today, with reports suggesting a cut of about 2 million barrels per day.
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Tags: FOMC

With No USD buyers in sight, we may see price stabilization or pullback ahead of Firday's data and next weeks FOMC. Read More...

Tags: USD, FOMC